SEC Charges Owner of Film Distribution Company with Defrauding Publicly Traded Fund

The Securities and Exchange Commission today announced charges against William Sadleir, the owner of a film distribution company, for defrauding a publicly traded fund of at least $13.8 million.

The SEC alleges that BlackRock Multi-Sector Income Trust (BIT), a registered closed-end management investment company, invested approximately $75 million in Aviron Group LLC, a film distribution company founded, owned, and operated by Sadleir. The complaint alleges that Sadleir represented that the investments would be used to support the company’s distribution of films. Contrary to these representations, Sadleir allegedly used a sham company as a vehicle to fraudulently divert and misappropriate BIT funds and issued fake invoices seeking BIT funds for services that were never provided. Sadleir allegedly used the funds to pay personal expenses, including his purchase, furnishing, and renovation of a Beverly Hills mansion.

“When private companies and individuals solicit or accept investments, including from investment companies, they must comply with the federal securities laws,” said Adam S. Aderton, Co-Chief of the Enforcement Division’s Asset Management Unit. “We allege that Sadleir raided millions from BIT and its investors, and rather than using those funds for investment purposes he spent them lavishly on himself.”

The SEC’s complaint, filed in federal court in Manhattan, charges Sadleir with violating the antifraud provisions of the federal securities laws and seeks disgorgement of ill-gotten gains, civil penalties, and permanent injunctive relief.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today filed criminal charges against Sadleir.

The SEC’s investigation, which is continuing, is being conducted by Salvatore Massa, Vincent T. Hull, and Brian Fitzpatrick of the Asset Management Unit, and Dugan Bliss and Kerri L. Palen of the New York Regional Office. The case was supervised by Andrew Dean of the Asset Management Unit. The SEC’s litigation will be led by Mr. Bliss and Mr. Massa. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation.